The Indian IT & Business Services market was valued at $13.41 billion in 2020, recording a 5.41 per cent year-over-year (YoY) growth compared to 8.43 per cent in 2019, according to International Data Corporation’s (IDC) Worldwide Semi-annual Services Tracker.

The IT services market contributed majority growth to the IT & Business Services market at 77.06 per cent. It grew by 5.97 per cent in 2020 compared to the 8.91 per cent growth in 2019.

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According to IDC, the IT & Business Services market will continue the growth momentum, picking up momentum gradually from 2021 onwards owing to increased spending in areas such as cloud, application modernisation, artificial intelligence, and automation, among others. The market is projected to grow at a CAGR of 7.18 per cent between 2020-2025 to reach $18.97 billion by the end of 2025.

“Enterprises across all sectors started investing in digital transformation as the pandemic made it evident that businesses with higher digital adoption would fare better than ones with traditional IT systems,” said Harish Krishnakumar, Senior Market Analyst, IT Services, IDC India.

During the second half of 2020, apart from cloud adoption and IT security, enterprises also started to increasingly invest in technologies like artificial intelligence, machine learning, and analytics for solutions like conversational AI and chatbots, fraud prevention, demand forecasting, etc., which would help streamline their business operations. Even sectors like manufacturing, which were adversely affected during the initial stages of the pandemic, started investing in cloud-based applications and automation projects, Krishnakumar added.

IDC has classified the IT & Business Services market into three primary markets — Project-Oriented, Managed Services, and Support Services. For 2020, the managed services segment registered the highest growth rate at 6.85 per cent, followed by project-oriented services at 5.92 per cent, and support services at 4.51 per cent respectively.

In the past year, hosted application management and hosted infrastructure services witnessed higher growth. This was as multiple enterprises continued to move to the cloud.

The growth is also attributed to the increase in demand for cloud services driven by the rise in remote working, online classes, and online streaming, amid the Covid-19 pandemic.

“While the year 2020 pushed enterprises to focus on survival and business continuity strategies through cost takeout and cost optimisation initiatives, the year 2021 will pave the way for business resiliency plans to kick-in and accelerated investments in technologies to support an enterprise’s digital goals,” said Shweta Baidya, Senior Research Manager, Enterprise Software and ICT Services, IDC India.

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“Some of the areas where IDC envisions clear opportunities for service providers include cloud enablement and augmentation services, network management, optimisation and automation, managed security services, and AI-based services, among others. With a large part of the workforce being out of action during the second wave of the pandemic, enterprises will look up to their service partners to enable digital transformation initiatives and prepare them to be a future-ready enterprise,” Baidya further said.

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